Hot housing market to cool in 2022: Fitch

Canadian housing prices are expected to keep rising in 2022, albeit at lower rates than this year, Fitch Ratings says.

In a new report, the rating agency said that home prices will continue to rise across North America and Latin America next year.

“Strong housing demand, rising construction costs and persistent housing shortages will continue to drive rising home prices but growth will be tempered by higher mortgage finance costs,” Fitch said.

For both the U.S. and Canada, prices are expected to grow between 5% and 7% in 2022, before downshifting in 2023.

The projected price growth for 2022 is well below the 15% price gains that Fitch estimated for the Canadian market in 2021.

“The slower growth will be driven by an expected rise in interest rates, inflationary pressures and declining affordability, which will dampen demand,” it said in its report.

Policy measures to curb growth, including tougher mortgage stress tests or new taxes on speculators, could help limit price gains, it said.

“These measures would further limit the number of borrowers who qualify for a mortgage or make it less economical to own a non-owner occupied property, which in turn would limit the number of buyers in the market (both new entrants and people looking to buy a bigger home),” the report said.

At the same time, mortgage arrears are expected to remain low in 2022, Fitch said, thanks to economic recovery, strong labour markets and robust home prices.

In particular, arrears in Canada are seen remaining near historic lows of 0.15% to 0.25% through 2023, it said.

“Record home price growth in Canada has been the main driver of low delinquencies and foreclosures by generally enabling borrowers in financial distress to sell their homes and pay their remaining balances,” the report said.

“In addition, banks are proactively working with borrowers in distress to avoid foreclosure where other options are not available,” it added.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.